ExpertMedium2 marksShort Answer
ACCA · Question 06 · Recording transactions and events
A business sells goods for $1,740, which is inclusive of sales tax at 20%. What is the net sales revenue amount that should be credited to the sales account? (Enter numbers only, no currency symbols)
A business sells goods for $1,740, which is inclusive of sales tax at 20%. What is the net sales revenue amount that should be credited to the sales account? (Enter numbers only, no currency symbols)
How to approach this question
Extract the net amount from a gross figure by dividing by (1 + tax rate).
Full Answer
The gross amount of $1,740 represents 120% (100% net + 20% tax). To find the net amount (100%), calculate: $1,740 / 1.20 = $1,450.
Common mistakes
Calculating 20% of $1,740 and subtracting it ($1,740 - $348 = $1,392), which is incorrect because the tax is based on the net amount, not the gross.
Practice the full ACCA FA — Financial Accounting Practice Exam 2
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